Under Michigan law, earnest money deposits must be:

Earnest money deposits are a critical component of real estate transactions, serving as evidence of the buyer's good faith intention to purchase the property. In Michigan, as in most states, these funds are subject to specific regulatory requirements to protect both buyers and sellers. The question tests your knowledge of Michigan's earnest money handling rules, which are designed to ensure proper fund protection and prevent potential disputes. When analyzing this question, it's essential to recognize that real estate laws vary significantly by state, and Michigan has specific requirements that differ from other states. The correct answer reflects Michigan's mandate for brokers to place earnest money into a trust account promptly—within 2 banking days—rather than allowing the seller to hold it directly or giving it to the buyer's attorney. This regulation prevents commingling of funds and protects the earnest money until the transaction closes or is properly terminated.